Cryptocurrency is quickly becoming one of the leading ways in which assets are held, particularly amongst young people. It is estimated that over 1 million Australians own at least one form of cryptocurrency.
Despite its popularity and recent categorisation as ‘property’ by the ATO, there is no formal way to deal with cryptocurrency in the administration of an estate on the death of a person. This is primarily as cryptocurrency, by its nature, is entirely self-regulated with no central governing body. So, what do you need to consider when cryptocurrency forms part of your estate?
The importance of your private key
Owners of cryptocurrency can only access their assets using a private key. This private key is often an automatically generated, 26-word password.
If not appropriately planned for, the private key can present a major challenge to passing cryptocurrency onto your loved ones once you are gone.
Without the private key, there is no way to access a crypto asset. Although the asset will continue to exist, it will be inaccessible. This means that if you die before making safe and adequate plans to protect and pass on your cryptocurrency, your asset will essentially be lost forever.
While there are a number of ways to safely store your private key in your lifetime (like a physical safe, locked hard drives and digital wallets) each option comes with its own risk, and it isn’t guaranteed that the information will be accessible to the right person when you die.
Incorporating cryptocurrency into your estate plan
Like any other asset, the legal right to your cryptocurrency can be passed on through your Will. When incorporating cryptocurrency into your estate plan, your executor will need to be aware of how cryptocurrency technology works, how to identify your assets, how to unlock them and, finally, how to distribute them to your beneficiaries.
As cryptocurrency is a relatively new way of holding assets, there is no hard and fast rule with how it should be delt with. It is, however, widely accepted that your private key should never be included in your Will itself.
Including cryptocurrency in your estate plan is vital to ensuring your loved ones have access to the significant financial resource that your assets might be once you have passed away. Our team at Osborn Law have the tools necessary to help ensure information regarding your cryptocurrency assets is made available to your executor upon your death, while also maintaining your privacy and security while you are living.
If you would like to discuss your estate plan in more depth, please contact the Osborn Law Estate Planning Team on (02) 4927 2900.
